JUDGMENT - S.S. NIJJAR, J.:---This suit has been filed by the plaintiffs with a prayer for a declaration to the effect that there is no valid agreement between the plaintiffs and the defendant No. 1 for supplies by the plaintiffs to the defendant No. 1 of R.S. Joists as per the order dated 8th/10th July, 1995 on the terms and conditions contained in the tender being Ex. B to the plaint. Further the defendant No. 1 is not entitled to call upon the plaintiffs to make supplies in terms of the aforesaid order. It is also prayed that the defendant No. 1 is not entitled to invoke the Bank Guarantee dated 3rd December, 1994 and receive a sum of Rs. 5 lakhs or any other amount which is issued by the defendant No. 2 in favour of the defendant No. 1 for and on behalf of the plaintiffs. There is also a prayer for permanent injunction restraining the defendant No. 1 from invoking the Bank Guarantee dated 3rd December, 1994. Permanent Injunction is also prayed for against the defendant No. 2 from making payment of Rs. 5 lakhs on the basis of the Bank Guarantee. 2.This Notice of Motion has been taken out for interim reliefs which are also sought as final reliefs. Prayer Clause (a) is for an injunction restraining the defendant No. 1 from in any manner insisting upon or compelling the plaintiffs to supply the R.S. Joists on the basis of the order dated 8th/10th July, 1995. Prayer Clause (b) seeks an injunction against the defendant No. 1 restraining him from invoking the Bank Guarantee. Prayer Clause (c) seeks an injunction restraining the defendant No. 2 from making payment of Rs. 5 lakhs on the basis of the aforesaid order. An affidavit in support of the Notice of Motion has been filed. In this affidavit, the prayers made in the suit have been repeated. Thereafter it is stated that the averments made in the plaint are reiterated. In these circumstances, it is prayed that the Notice of Motion be made absolute. 3.The defendant No. 1 invited tenders in December, 1994. The said tenders were to be received on 7th December, 1994. Opening of the tender was on 8th December, 1994. Thereafter it is stated that the averments made in the plaint are reiterated. In these circumstances, it is prayed that the Notice of Motion be made absolute. 3.The defendant No. 1 invited tenders in December, 1994. The said tenders were to be received on 7th December, 1994. Opening of the tender was on 8th December, 1994. The tenders were valid for acceptance upto and inclusive of last date of the calendar month covering the date of completion of 180 days from the date of opening of the tender i.e. upto 30th June, 1995. The plaintiffs submitted the tender by their letter dated 6th December, 1994. In the tender document, the plaintiffs have mentioned the name of Mr. R.M. Chopra and Mr. Raj Chopra as the Bombay contact persons. Mr. R.M. Chopra is mentioned as the agent of the plaintiffs at Item No. 8 of the tender document. The address of Mr. R.M. Chopra is also given. But no power of attorney has been executed in favour of Mr. R.M. Chopra, so as to constitute him as the agent of the plaintiffs. Thus, Mr. R.M. Chopra was only the contact person of the plaintiffs in Bombay. In fact, one Mr. Mukul Chander was directed to submit the tender documents and to participate in the tender proceedings. The terms of the tender required that the tenderer should pay earnest money at 3% of the offer value upto Rs. 1.75 lakhs and thereafter at 1% of the balance offer value limited to Rs. 5 lakhs. The earnest money shall be paid in cash or by demand draft, it is provided that the earnest money deposit shall be forfeited (i) in case tenderer withdraws the tender/offer during the validity period; (ii) in case the tenderer fails to pay the security deposit if the contract is awarded. The tenderers of some categories were exempted from payment of earnest money deposit. It included all Government and semi Government institutions, small scale industrial unit registered with the Director of Industries, Maharashtra, small scale units registered with the National Small Industries Corporation. The category for exemption is "The firm having a valid permanent Bank Guarantee of Rs. 5,00,000/ (Rs. Five Lakhs) with the Board". The defendant No. 2 was requested to issue a permanent Bank Guarantee in favour of the defendant No. 1 so that the plaintiffs would be exempted from payment of earnest money of Rs. The category for exemption is "The firm having a valid permanent Bank Guarantee of Rs. 5,00,000/ (Rs. Five Lakhs) with the Board". The defendant No. 2 was requested to issue a permanent Bank Guarantee in favour of the defendant No. 1 so that the plaintiffs would be exempted from payment of earnest money of Rs. 5 lakhs against the tender. The defendant No. 2 on 3rd December, 1994 issued a permanent Bank Guarantee in favour of the defendant No. 1 agreeing to pay at Bombay within 48 hours on demand in writing from the defendant No. 1 an amount not exceeding the amount of Rs. 5 lakhs for and on behalf of the plaintiffs. The Bank Guarantee provides that it would be valid and binding on the defendant No. 2 upto and inclusive of 2nd December, 1995. In the Guarantee it is stated that the Bank agreed inequivocally and unconditionally to pay, at Bombay within 48 hours, on demand in writing of any amount upto and not exceeding Rs. 5 lakhs. The agreement shall not be terminable by notice or any change in the constitution of the Bank or firm of contractors or by any other reasons whatsoever and the liability of the Bank shall not be impaired or discharged by any variation or alteration made, given, conceded with or without their knowledge or consent, by or between the parties to the said written contract. The validity of the Bank Guarantee will be extended by a further period of 12 months at the request of the defendant No. 1. The plaintiff further states that till May 1995, they did not hear anything from the defendant No. 1. However, they received a telegram dated 24th May, 1995 requesting the plaintiffs to extend the validity of the offer upto and inclusive of 31st July, 1995 without change in price and other terms and conditions of tender. The plaintiffs replied to the said telegram on 20th June, 1995 declining to extend the time limit. Copies of this letter were sent to various officers of the defendant No. 1. By letter dated 7th July, 1995, the plaintiffs directed the Bank to cancel the Bank Guarantee. On the very next day, the defendant No. 2 wrote to the defendant No. 1 requesting for return of the Bank Guarantee. Copies of this letter were sent to various officers of the defendant No. 1. By letter dated 7th July, 1995, the plaintiffs directed the Bank to cancel the Bank Guarantee. On the very next day, the defendant No. 2 wrote to the defendant No. 1 requesting for return of the Bank Guarantee. However, on the same day i.e. 8th July, 1995, the defendant No. 1 sent an order to be executed by the plaintiffs. This order was sent by telegram and it was stated therein that the detailed order follows. On 11th July, 1995, the plaintiffs wrote back to the defendant No. 1 stating that they have not given any offer whatsoever dated 26th May, 1995 as mentioned in the telegram. The validity of the offer was only upto 30th June, 1995. Photostate copies of the earlier letters were sent to the plaintiffs. In reply to this, the defendant No. 1 stated that they had accepted the offer, in view of the letter dated 26th May, 1995, wherein validity was extended upto 31st July, 1995. The letter dated 26th May, 1995 received from one Mr. Raj Chopra was also sent by the defendant No. 1 to the plaintiffs. The plaintiffs protested by their letter dated 29th July, 1995 that the defendant No. 1 are wrongly acting on a letter sent by one Mr. Raj Chopra. It was stated that the said person is not the authorised signatory. He was never authorised to act as agent of the plaintiffs. In fact, Mr. R.M. Chopra was to be the representative in Bombay. Consequently, the plaintiffs declined to commence the supply in terms of the order dated 8th July, 1995. Inspite of the aforesaid, when the plaintiffs came to know that the defendant No. 1 is adamant in invoking the Bank Guarantee, the present suit has been filed. 4.The Counsel for the plaintiffs has submitted that the validity of the tender was only upto 30th June, 1995. No acceptance had been received upto 30th June, 1995. Thus, there was no concluded contract between the parties. The plea put forward by the defendant No. 1 is wholly fallacious and would not constitute a conclusive contract. Mr. Raj Chopra was only the contact person of the plaintiffs in Bombay. He was never constituted as an agent of the plaintiffs. He had no authority whatsoever to sign any documents. Thus, there was no concluded contract between the parties. The plea put forward by the defendant No. 1 is wholly fallacious and would not constitute a conclusive contract. Mr. Raj Chopra was only the contact person of the plaintiffs in Bombay. He was never constituted as an agent of the plaintiffs. He had no authority whatsoever to sign any documents. Consequently, the alleged letter dated 26th May, 1995 written by Mr. Raj Chopra extending the validity of the tender upto 31st July, 1995 is utterly useless, and cannot be made use of by the defendant No. 1. The defendant No. 1 cannot invoke the Bank Guarantee in law. In view of the tender terms, the security could only be forfeited in the event the plaintiffs had withdrawn the tender during the validity period. This was not done by the plaintiffs. Consequently, the earnest money would be forfeited in case the plaintiffs have failed to pay the security deposit. This eventuality would only arise if there is a concluded contract. Since there is no concluded contract, it cannot be said that the plaintiffs have failed to pay the security deposit. The Bank Guarantee was only furnished in order to get exemption from failing to pay the earnest money. Clause (XXV)(4) of the tender provided that a firm having a valid permanent Bank Guarantee of Rs. 5,00,000/- with the Board shall be exempted from paying the earnest money. According to the Counsel, this being the position, the defendants are not entitled to invoke the Bank Guarantee, nor can the plaintiffs be compelled to make supplied in accordance with the order dated 8th/10th July, 1995. In support of his submissions, the Counsel has relied upon the judgement of this Court reported in 1987(1) Bom.C.R. 405 in case of (Kirloskar Pneumatic Company Ltd. v. National Thermal Power Corporation Ltd. another)1. Relying on the said judgement, the Counsel has submitted that the Bank Guarantee was not a performance guarantee. It was a guarantee issued in lieu of the earnest money. This Guarantee could only be invoked if the tender has been withdrawn before the validity period i.e. 30th June, 1995. In that case, National Thermal Power Corporation Ltd. (N.T.P.C.), a Government of India Enterprise, invited tenders for the design, engineering, manufacture, erection, testing and commissioning of Air-Conditioning and Ventilation Systems to be installed at two Satellite Earth Station Sites. This Guarantee could only be invoked if the tender has been withdrawn before the validity period i.e. 30th June, 1995. In that case, National Thermal Power Corporation Ltd. (N.T.P.C.), a Government of India Enterprise, invited tenders for the design, engineering, manufacture, erection, testing and commissioning of Air-Conditioning and Ventilation Systems to be installed at two Satellite Earth Station Sites. The last date and time for submission was 26th February, 1985. The bids were to be opened on the same day after about half an hour. The Bidder was required to furnish a bid guarantee for an amount of 2% of the bid price along with the bid and a contract performance guarantee for 10% of the contract value at the time of the award of contract. The bid guarantee was to be valid for a period of 7 calendar months from the date set for the opening of the bids. The Bid Guarantee of the successful Bidder was to be returned after the successful Bidder provides the Contract Performance Guarantee. If the Performance Guarantee is not supplied within 30 days after the date of the Notice of Award of the Contract, then the Bid Guarantee amount was to be forfeited. Thus, it is obvious that there were two Guarantees -(1) Bid Guarantee (2) Performance Guarantee, which was to be given after the Award of Contract. Kirloskar Pneumatic Company Limited of Pune (Kirloskar) submitted their tender, which was opened on 26th February, 1985 along with the other tenders. However, since they had mistakenly quoted lesser price, they submitted a revised bid on 15th July, 1985. On 5th September, 1985, N.T.P.C. replied that the price cannot be increased after the bids were opened on 26th February, 1985. All efforts of settlement had failed, and N.T.P.C. invoked the Bank Guarantee for Rs. 4,00,000/- being the bid guarantee furnished by Kirloskar. The suit was filed by Kirloskar, for a declaration that N.T.P.C. are not entitled to invoke the Bank Guarantee. An application for injunction restraining N.T.P.C. from invoking the Bank Guarantee was also made. All efforts of settlement had failed, and N.T.P.C. invoked the Bank Guarantee for Rs. 4,00,000/- being the bid guarantee furnished by Kirloskar. The suit was filed by Kirloskar, for a declaration that N.T.P.C. are not entitled to invoke the Bank Guarantee. An application for injunction restraining N.T.P.C. from invoking the Bank Guarantee was also made. Keeping these facts in view, it has been held in para 26 of the judgement that in the light of the above discussion, it is clear that as the bid given by Kirloskar was withdrawn before it was accepted, no contract as such has come into existence between Kirloskar and the N.T.P.C. It is not the case of the N.T.P.C. that they had offered any consideration to Kirloskar to keep the offer open for a period of six months and even though the contract document provided to that effect it was always open to Kirloskar to revoke their offer before it was accepted. After discussing all the facts which are narrated in the said judgement that the contract having not been awarded, the question of submitting the Contract Performance Guarantee did not arise, nor did the question of forfeiting of Bid Guarantee. Granting injunction, the Court has held that there was no contract between the parties to keep the bid alive. The bid could be revoked before the acceptance as Kirloskar have done. The N.T.P.C. did not act to their detriment relying on the bid of Kirloskar. The bid guarantee could only be invoked if the contract were to be awarded to Kirloskar and they had failed to pay the amount or to perform their part which stage never arose. Thus, N.T.P.C. could not invoke the bid guarantee in terms of the contract and hence, a clear prima facie case exists in favour of Kirloskar. It was also held that the balance of convenience also is clearly in favour of Kirloskar, because at the end of the litigation, N.T.P.C. would be able to recover the amount of the Bid Guarantee, or such other sum as may be determined by the Court. This finding is given in view of the fact that, it is nobody's case that Kirloskar are not solvent to the extent of Rs. 4,00,000/- and therefore, the conditions of issuance of temporary injunction are satisfied. This was an appeal filed against the order rejecting the injunction passed by Civil Court at Pune. This finding is given in view of the fact that, it is nobody's case that Kirloskar are not solvent to the extent of Rs. 4,00,000/- and therefore, the conditions of issuance of temporary injunction are satisfied. This was an appeal filed against the order rejecting the injunction passed by Civil Court at Pune. 5.The Counsel for the defendant No. 1 has stated that rightly or wrongly, the defendants have been informed on 26th May, 1995 that the validity period has been extended by the plaintiffs upto 31st July, 1995. Relying on the said letter, the order was passed on 8th/10th October, 1995. So far as the defendants are concerned, there was a concluded contract. In the event, the defendants act in breach of contract, they are entitled to invoke the Bank Guarantee. These are the pleas which are taken by the defendant No. 1 in the affidavit in reply. It is further submitted by the Counsel for the defendant No. 1 that the Bank is duty bound to honour the guarantee. They have no option, but to make payment in accordance with the Bank Guarantee when the same is invoked. The Counsel has submitted that the law on Bank Guarantees has been considered by the Division Bench of this Court in the case of (Kisan Sahakari Chini Mills Limited v. Richardson Cruddas (1972) Ltd. and another)2, reported in 1997(1) Bom.C.R. 638 . After considering whole of the case law, certain principles have been culled out by the Division Bench. The case of the defendant No. 1 falls squarely within the principles laid down by the Division Bench. Consequently, it is stated that there is no merit in the Notice of Motion. In fact both, the Notice of Motion and the suit deserves to be dismissed. 6.I have carefully considered the submissions made by the Counsel. In view of the judgment of the Division Bench the findings given by the Single Judge in the case relied upon by the plaintiffs have lost all significance. The Division Bench is not only a larger Bench, but the judgement is also later in time. A perusal of the principles called out in para 17 of the said judgement shows that the Bank Guarantee is a contract which is quite distinct and independent of the underlying contract. The Division Bench is not only a larger Bench, but the judgement is also later in time. A perusal of the principles called out in para 17 of the said judgement shows that the Bank Guarantee is a contract which is quite distinct and independent of the underlying contract. The Bank is required to honour the Bank Guarantee, the Bank issuing a guarantee is not concerned with the underlying contract between the parties to the contract. In para 17 the following principles have been laid down:- "17. The principles that emerge from the above decisions of the Supreme Court can be summed up thus : (i) That a Bank Guarantee is ordinarily a contract quite distinct and independent of the underlying contract, the performance of which it seeks to secure and the Bank is required to honour the guarantee according to its terms. The rule is well established that a Bank issuing a guarantee is not concerned with the underlying contract. The duty of the Bank under a performance guarantee is created by the document of guarantee itself. Once that document is in order, the Bank giving the guarantee must honour the same and to make payment. (ii) The commitments of the Banks under a Bank guarantee must be honoured free from interference by the courts. Otherwise trust in commerce, internal and international, would be irreparably damaged. (iii) It is only in exceptional cases, that is to say in case of irretrievable injustice or fraud, that the Court should interfere. (iv) The nature of fraud is fraud of an egregious nature as to vitiate the entire underlying transaction. It is fraud of the beneficiary, not the fraud of some body else. There must be a specific plea of fraud. The party alleging fraud must necessarily plead and produce all necessary evidence in proof of the fraud in execution of the contract of guarantee. Moreover, fraud like any other charge of a criminal proceedings must be established beyond reasonable doubt. A finding as to fraud cannot be based on suspicion and conjecture. The material and evidence have to show it. (v) Irretrievable injustice should be of kind arising in irretrievable situation, the irreparable harm should not be speculative. It should be genuine and immediate as well as irreversible. A finding as to fraud cannot be based on suspicion and conjecture. The material and evidence have to show it. (v) Irretrievable injustice should be of kind arising in irretrievable situation, the irreparable harm should not be speculative. It should be genuine and immediate as well as irreversible. It should be a case where the party seeking restraint on invocation of Bank Guarantee has no adequate remedy of law at all and the harm to him would be irreparable. The subsequent dispute in the performance of the contract does not give rise to cause nor the Court would be justified on that basis to issue an injunction from enforcing a Bank Guarantee, because the party is not left without remedy in such a case, he is entitled to damages and other consequential reliefs. (vi) The same principles will apply to cases where injunction is sought against a party seeking to invoke the Bank Guarantee because the net effect of such an injunction is to restrain the bank from performing the Bank Guarantee. That is so, because one cannot do indirectly what one is not free to do directly." 7.I am of the considered opinion that the present case clearly falls in each and every principle as extracted above. The Bank has to honour the guarantee. No exceptional case has been made out by the plaintiffs. There is no irretrievable injustice or fraud which has been committed on the plaintiffs. The fraud in any event has to be the fraud of the beneficiary and not the fraud of somebody else. There must be a specific plea of fraud. No such plea is raised in the plaint. There is no irretrievable injustice which should be of a kind arising in irretrievable situation. Admittedly, a letter has been written by Mr. Raj Chopra extending the validity period of the tender. The authenticity or otherwise of the same, can only be determined after the parties have led evidence at the final stage of the suit. At present, the Court has to be guided by the affidavits which have been filed by the parties. Since prima facie it appears that there is a concluded contract, the judgement of the Single Judge in Kirloskar Pneumatic Company's case would not be applicable. At present, the Court has to be guided by the affidavits which have been filed by the parties. Since prima facie it appears that there is a concluded contract, the judgement of the Single Judge in Kirloskar Pneumatic Company's case would not be applicable. Rather the principles laid down by the Division Bench would make it wholly unjust to grant the relief of injunction as prayed for in the Notice of Motion. The Counsel for the plaintiffs has then submitted that by the ad interim order, they have been directed to keep the Bank Guarantee alive in order to secure the claim of the defendant No. 1, in the event the suit is dismissed. The Counsel for the defendant No. 1 has brought to the notice of the Court the latest judgement of the Supreme Court in the case of (U.P. State Sugar Corporation v. Sumac International Ltd.)3, reported in 1997 Bank.J 367 (S.C) After examining the case law, the Supreme Court has reiterated in para 12 and 14 as under :-- "12. The law relating to invocation of such Bank Guarantees is by now well settled. When in the course of commercial dealings an unconditional Bank Guarantee is given or accepted, the beneficiary is entitled to realize such a Bank Guarantee in terms thereof irrespective of any pending disputes. The Bank giving such a guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. The very purpose of giving such a Bank Guarantee would otherwise be defeated. The courts should, therefore, be slow in granting an injunction to restrain the realization of such a Bank Guarantee. The courts have carved out only two exceptions. A fraud in connection with such a Bank Guarantee would vitiate the very foundation of such a Bank Guarantee. Hence, if there is such a fraud of which the beneficiary seeks to take advantage, he can be restrained from doing so. The second exception relates to cases where allowing the encashment of an unconditional Bank Guarantee would result in irretrievable harm or injustice to one of the parties concerned. Hence, if there is such a fraud of which the beneficiary seeks to take advantage, he can be restrained from doing so. The second exception relates to cases where allowing the encashment of an unconditional Bank Guarantee would result in irretrievable harm or injustice to one of the parties concerned. Since in most cases payment of money under such a Bank Guarantee would adversely affect the Bank and its customer at whose instance the guarantee is given, the harm or injustice contemplated under this head must be of such an exceptional and irretrievable nature as would override the terms of the guarantee and the adverse effect of such an injunction on commercial dealings in the country. The two grounds are not necessarily connected, though both may coexist in some cases. In the case of (U.P. Co-op. Federation Ltd. v. Singh Consultants and Engineers (P) Ltd.)4, which was the case of a works contract where the performance guarantee given under the contract was sought to be invoked, this Court, after referring extensively to English and Indian cases on the subject, said that the guarantee must be honoured in accordance with its terms. The Bank which gives the Guarantee is not concerned in the least with the relations between the supplier and the customer; nor with the question whether the supplier has performed his contractual obligation or not, nor with the question whether the supplier is in default or not. The Bank must pay according to the tenor of its guarantee on demand without proof or condition. There are only two exceptions to this rule. The first exception is a case when there is a clear fraud of which the Bank has notice. The fraud must be of an egregious nature such as to vitiate the entire underlying transaction. Explaining the kind of fraud that may absolve a Bank from honouring its guarantee, this Court in the above case quoted with approval the observations of Sir John Donaldson, M.R. in (Bolivinter Oil S.A. v. Chase Manhattan Bank)5, (All E.R. at p. 352) "The wholly exceptional case where an injunction may be granted is where it is proved that the Bank knows that any demand for payment already made or which may thereafter be made will clearly be fraudulent. But the evidence must be clear both as to the fact of fraud and as to the bank's knowledge. But the evidence must be clear both as to the fact of fraud and as to the bank's knowledge. It would certainly not normally be sufficient that this rests on the uncorroborated statement of the customer, for irreparable damage can be done to a bank's credit in the relatively brief time which must elapse between the granting of such an injunction and an application by the Bank to have it charged." This Court set aside an injunction granted by the High Court to restrain the realisation of the Bank Guarantee." "14. On the question of irretrievable injury which is the second exception to the rule against granting of injunctions when unconditional Bank guarantees are sought to be realised the Court said in the above case that the irretrievable injury must be of the kind which was the subject-matter of the decision in the Itek Corpn. case. In that case an exporter in U.S.A. entered into an agreement with the Imperial Government of Iran and sought an order terminating its liability on stand by letters of credit issued by an American Bank in favour of an Iranian Bank as part of the contract. The relief was sought on account of the situation created after the Iranian revolution when the American Government cancelled the export licences in relation to Iran and the Iranian Government had forcibly taken 52 American citizens as hostages. The U.S. Government had blocked all Iranian assets under the jurisdiction of United States and had cancelled the export contract. The Court upheld the contention of the exporter that any claim for damages against the purchaser if decreed by the American Courts would not be executable in Iran under these circumstances and realisation of the Bank Guarantee/letters of credit would cause irreparable harm to the plaintiff. This contention was upheld. To avail of this exception, therefore, exceptional circumstances which make it impossible for the guarantor to reimburse himself if he ultimately succeeds, will have to be decisively established. Clearly, a mere apprehension that the other party will not be able to pay, is not enough. In Itek case there was a certainty on this issue. This contention was upheld. To avail of this exception, therefore, exceptional circumstances which make it impossible for the guarantor to reimburse himself if he ultimately succeeds, will have to be decisively established. Clearly, a mere apprehension that the other party will not be able to pay, is not enough. In Itek case there was a certainty on this issue. Secondly, there was good reason, in that case for the Court to be prima facie satisfied that the guarantors i.e. the Bank and its customer would be found entitled to receive the amount paid under the guarantee." 8.In view of the above, I find no merit in the Notice of Motion. The same is hereby dismissed with no order as to costs. At this stage the Counsel for the plaintiffs prays that the ad interim order has continued for two years and therefore, the same may be continued for another two weeks. In my view, the ad interim order has been in operation already for a long period of time. There is no justification. Rejected. Notice of Motion dismissed.